Mike was a doctor in Texas. He made a lot of money, but he worked his butt off to earn it; with 20 years of schooling, 3 years in residency, and sometimes working 90-100 hours a week, giving up half to a government that was going to waste it on a bridge to nowhere really irritated him. About 48% of the $1.1-1.4M 1099 income he made went to pay taxes and because of it, he practically had an anxiety attack when he had to write those $100,000+ checks to the IRS every quarter.

He lived in a gorgeous 7,000 square foot house, both him and his wife drove luxury cars on top of his Ferrari, Maserati, and Range Rover fun cars and his kids went to private schools, but he only spent about 150,000-175,000 per year on their lifestyle. That meant that he was paying taxes on about $1-1.2M of income that he didn’t really need.

His colleague, Chris, told Mike about us after helping him with a similar circumstance. After a 30-minute conversation to understand his situation, we presented Mike with a few income tax-saving options such as oil and gas exploration, the creation of a non-profit foundation, the charitable remainder trust, and a customized retirement planning cash balance strategy. He decided that the retirement planning cash balance option made the most sense for him and his family.

Our actuary put together a plan based on his goals. He contributed an average of about $1M to a Super 401k, Pension Cash account, 401h, and COLA retirement accounts. In about 3 years he had accumulated a bit more than $3.2M and saved $1.5M in taxes.

He told me “Rocco, I was either going to give the $500K to the IRS or I was going to give it to my myself into my retirement account – it was a bit of a no brainer.”

“I was practically getting a 100% return on my money immediately because I’m putting about double into my retirement account then I would have been able to. So now, I am not making 4-8% per year on the $500K retirement account that I would have had before, but now I am making 4-8% a year on the entire $1M. It means that the retirement account grows exponentially faster. It would have taken me 5-6 years to accumulate a retirement account of more than $3M before.”

To say that he appreciated our suggestions, was a bit of an understatement. But he was not alone:

Joe in New Jersey who ran a carpet installation business averaged net income of about $500-700K per year. We approached his situation in a similar fashion as Mike and he saved about $250K per year from his tax bill while amassing a $3.5M retirement fund in 5 years.

John on Long Island who had a real estate business netted about $500-600K a year. We were able to save him about $200K a year in taxes.

Ross lived in between New York City and Miami running a Herbalife distributorship and he averaged between 900K-1.1M net income and we used the same strategies to defer him and his wife about $350K in taxes as well.

Finally, Ron in Boston was a dentist as he was able to knock off $100K from the check that he wrote Uncle Sam as well.

Problems and Misconceptions

The problem is that when most people think about retirement planning, they are thinking about SEP account, Standard 401k, Standard IRA, or a Roth IRA.

For those making more than $250K a year, the maximum amount they can contribute with these plans is so tiny (typically a $18-59K contribution only results in tax savings if $9-25K) that it hardly helps them make a dent at all if their tax bill gets into the $200-400K range, so many don’t even bother.

The most frequent response I get when I talk to high earners about making small changes to their planning that save them up to $500,000 a year …is “….Is that legal? I have a CPA and he takes all the deductions possible. How come he hasn’t showed me something like this before?”

And one would think that your CPA would offer the best tax advice to save on taxes, right?

Yes, a CPA may know about the accelerated depreciation benefits of Section 179 or the intricate details of how to expense mileage on your car travel, but most CPA’s don’t know anything about many of these loopholes available to their business and 1099 clients, nor are they incentivized by the $5-10K they’re paid every year to find those special loopholes.

Are they really going to take a risk in making a mistake or the time to learn something new in the middle of tax season on something they are not experts in, in order to save you a few extra dollars. Not likely.

My name is Rocco Beatrice and I hold a CPA, MBA, MST (Master’s Degree in Taxes). I am the Managing Director at Estate Street Partners. In business for more than 30 years, we have an A+ with the BBB, are a member of the National Ethics Association, and have helped more than 4,100 families protect and save more than $4.3 Billion.

While I’ve been quoted on ABC, Fox, or CBS about how business owners and 1099 employees just don’t take advantage of their biggest tax loopholes, I don’t tell you that to impress you. I tell you that because I want you to know that these are not necessarily new ideas, but they work 100% of the time and are part of the IRS tax code… and I have several Favorable Determination Letter’s from the IRS to prove it!

A few years back congress passed the Pension Protection Act and your accountant may not be aware of how these changes can dramatically change your tax bill – most accountants are not.

The Secret

So what is the secret to increasing limits on cash balance retirement plans like this? The secret is that when you get a pension actuary to approve a customized plan, the limits can be as much as 20 times higher than the standard off-the-shelf plans. The IRS relies on the actuary’s number and if they bless the plan, you are golden. Our actuary has created more than 5,000 plans like these over his 46 year career so you can trust you’re getting the best experience in the business.

The Cherry On Top

And the cherry on top is that up to 33% of your contributions to a cash balance plan can be put into the ultimate in retirement accounts very few have even heard of…the 401h.

The 401h is better than the 401k, IRA, Roth IRA – really anything out there. Why? Because they offer a 100% tax-deduction on contributions, it grows capital gains free, and there is no tax on the money when it’s taken out … if used for medical “related” expenses.

And with couples over 55 expected to spend more than $460K on medical related expenses during the remainder of their life span according to AARP, not even including nursing home costs, tax-free “medical expenses” is a huge benefit. The 401h covers a huge variety of items including medical insurance, insurance deductibles, Lasik Eye Surgery, Personal Trainers, Spa Facilities, Usage Fees for Facilities, dentures, dental fees, nursing home care, and on and on and on…there is a list of literally hundreds of things it can be used for.

Believe it or not, the tax year is only weeks away from ending. If these strategies seem intriguing, then there’s not much time left because once the clock turns midnight on December 31, the carriage turns into a pumpkin and we will be forced to start planning for 2017. Since everyone procrastinates, imagine how impossible will be to get anything accomplished in December.

Getthing This Done

So how does one get this done? Just tell your CPA that you are interested these tax strategies. If they aren’t familiar, then we can help them get up to speed quickly. Yes, we’ll work with your CPA. Typically, we can review your situation in a 15-30 minute consultation. We then have our actuaries present a proposal. If it makes sense to you, your accountant with our guidance can help you execute the plan.

The Catch

So what’s the catch? The catch is that while one never pay taxes on the 401h money when used for medical expenses, with the Cash Balance plan or Super 401k accounts one will need to eventually pay taxes when they take the money out. But wait a second. Right now, we are paying 40-60% in taxes on money that we don’t immediately need. We are living on $100-200K per year.

By the time retirement comes around, there is likely going be a much lower tax bracket because you’re only going to take out what is needed to spend and we could avoid the FICA, state tax and Obama tax altogether. You might even live in a lower tax state like Florida or Texas with zero income tax.

Interested in these strategies? First ask your CPA about them. If he is not familiar, or does not want to go it alone, we can help. Contact Rocco Beatrice at or (888) 938-5872.